Hon. J. P. Gibbs Opinion No. 0-6064
Casualty Insurance comml ssioner Be: Questions relating to
Board of Insurance Commissioners title insurance and rebat-
Austin, Texas ing on the part of agents
for such insurance companies
appointed under Section 21,
mar sir: Article 1302(a).
In your letter of February 12, 1945, you submit the
follcwlng questions you desire answered in an opinion of this
department:
It ue stlon No. Jr May an agent for an in-
corporated title insurance company furnish, in
part consideration of the premium or, as an in-
ducement to secure the sale of a i It.16 policy,
the service of preparing deed of conveyance and
also, in some instances, prepare quit claim deeds
and other curative Instruments for grantor or
grantee purchasing a title insurance policy
through’ said agent, when such policy does not
provide for furnishing these services, and not
be in violation of Section 21, Article 1302(a)
or any other law which should be considered by the
Hoard? ‘,
“Ouestl~a If the agent of the title
aompany Is a partnership; one member of which
firm or partnershlp is a licensed attorney and
such attorney prepares deed of conveyance or quit
claim deeds and Cther auratlve lrm truments for
grantor or grantee busring a title insurance pol-
icy through the agency in which said attorney has
a partnership interest, would the fact that the
attorney makes no charge and collects no fee from
grantor or grantee constitute a rebating practice
on the part of the agent of the title company un-
der Section 21, Article 1302(a) or any other law
which this Board should consider?”
Article 1302(a), Vernon’s Annotated Civil Statutes,
provides in Section 1 for the creation of private corporations
for the following purposes:
--
Hon. J. P. Gibbs, page 2 (0-6064)
1. To compile and own or to acquire and own
reaordsor abstracts of titie to laud and interest
in laud; and
2. To insure title to lands or interest there-
in and indemnify the owners of such lands,
or ihi &ders of interests in all liens on such
land, against loss or damage an account of encum-
brances upon or defects In the title to such lands
or interests therein.
In Section 3 of ~said statute It is specifically pro-
vided that such corporations shall operate in Texas under tlz
control and supervision and under such uniform rules and regu-
lations as to forms of polfcies and underwriting contracts
and premiums~therefor, as may be from time to time prescribed
by the aoard of Insurance Commissioners of Texas. No title
policy or mortgage certificate or underwriting contract other
than under the provisions of the act, rules and regulations
of the Board shall be permitted; no title policy shall be is-
sued or valid unless written by a corporation complying with
all provisions of and authorized or qualjfied under the act j
every form of mortgage policy, guaranteed certificate or title
insurance must be approved by~the Board and no form may be
used until after stuns shall have. been approved by the Board.
Also In Section 3 it is made the duty of the Board
to fix and promulgate the rates of premium to be charged by
corporations created or operating thereunder on policies or
certificates and underwriting contracts, it being expressly
provided that the rates shall be reasonable to the public and
non-confiscatory to the .aompany. The Board of Insurance Com-
missioners is authorized to require any company to submit data
in such form as the Board may deem proper and to be, used for
the purpose of determi.nl.hg proper rates to be fixed. Such
data may ,include all ‘information as to.. loss. experience, ex-
pense of operation and other Qaterial matter for then Board’s
conslderat ion.
.
It Is further provided~ In then above mentioned Sec-
tion of the law that no rate of premium shall be charged dif-
ferent from that fixed and promulgated by the Board.
Seation 4~ provides that corporations~ organized under
the laws of any other State. shall be permitted to- do business
in this State on exactly the same basis and subject to the same
rules, regulations, and prices and supervision as fixed for
Texas corporations. ~‘,
Hon. J. P. Gibbs, page 3 (0-6064)
Section 21 of said statutes provides:
“No commissions, rebates, discounts, or other
device shall be paid, allowed or permitted by any
domestic or foreign doing the business
~~%f% for in this Act , .re 1 sting to title policies
or underwriting contracts; provided this shall not
prevent any title company from appointing as its
representative in any county any person firm or
corporation owning and operating an abs t ract plant
in such county and making such arrangements for
division oft premiums as may be approved by the
Board of Insurance Cornmissioners.”
Section 24 provides that the terms and p,rovisions of
the Act are conditions upon which corporations doing business
thereunder are permitted to exist and that failure to comply
with any of its terms and provisions or a violation of any
.of the terms of the Act shall be proper cause for revocation
of the permit and forfeiture of charter of any such domestic
corporation or the permit of a foreign corporation.
It appears settled that title insurance is a busi-
ness affected with the public interest, affected by public
use, and the Legislature has power to provide reasonable rules
and regulations governing its policies, forms and rates. New
York Title and Mortgage Corn any v, Tarver 51 Fed. 2d 584, and
authorities cited therein, g2 Cor. Jur. 16%.
Generally, the right of an inswance agent to com-
pensation . . . for selling, and effecting contracts of ln-
sursnce or performing services in relation thereto, is depend-
ent upon the terms of the contract existing between the agent
and the company. In the absence of special circumstances,
including contractual or statutory provisions, an agent of the
Insurer who solicits or effect’s insurance clearly is not an
agent of the insured. 29 Amer. JUT. Par. 89 p. 112, 133; Vol,.
2 Couch Encyc. on Insurance Law, Par. 459, 74 A.L.R. 475.
In order to place a reasonable limit on our endeavor
in the broad field of agency and its relationships brought
about by your use of the term “agent”, you have informed us
that you have in mind and refer in your questions to such in-
dividuals or firms authorized and appointed as the representa
tive of title insurance companies referred to In Sec. 21 Art.
1302a, V.A.C.S. It is therefore apparent from your ques c Ions
and we assume that such representatives or agents are authorized
to and do effectuate contracts of insurance for their principal
.” to insure the title to lands and liens thereon, performing
Hon. J. P. Gibbs, page 4 (0-6064)
all other incidental acts in respect to such business, and
consequently representing the principal beyond the point of
mere acting In a supervisory capacity.
There is this noted distinction Involved in the two
questions which you present. In Question No. 1 the term
“agent” may or may not Include a licensed attorney, member
of the State Bar who effects the contract of insurance. In
Question No. 2 the licensed attorney, member of the State Bar
has an Interest in the agency partnership, which agency ef-
fects the contract of insurance. The identical service, free
of separate charge, is involved in both questions.
We therefore assume and interpret the factual rela-
tionship in the two questions as the same on this point that
is, that both the agent and agency receive a division oh the
premium or a commission from the title insurance company for
effectuating the contract and that such service Inquired of
and rendered, involves no separate charge therefor.
Your letter and the questions propounded apparently
assume continuity in the rendering of such service, its per-
formance, either (a> or (b) .‘ However, same having been held
not to be a necessary incident to the business of insuring
titles, it would necessarily follow that the rendering of
such service is not a necessary incident in making “title
search” or “title examination” within the Board’s rule in-
cluding the charge therefor within the premium schedule.
Giving full import to that part of your questions
stating such service performed “In part consideration of the
premium” we not only assume that no separate charge is made
for such service as stated in the second question above set
forth but that there are facts necessarily in existence to
bring the furnishing of such service as an Inducement to the
applicant for insurance to effectuating the contract of insur-
ance. In other words in order for such service to be render-
ed “In nart consldera c Ion of the premium”, the rendering of
such service was a necessary inducement to accomplish, com-
plete produce or bring about the Issuance of the title policy
for w!Iich a percentage of the premium Is allowed the agent.
Our attention is directed to the case of Hexter
Title and Abstract Company et al. v. Brievance Committee,
State Bar of Texas et al. 179 S.W.2d 946, Opinion by the
Supreme Court. In review 1ng this case, we particularly no:;
that same was decided upon an agreed statement of facts. -
cording to Paragraph 3 In the opinion, the defendant, a title
and abstract corporation, admitted that occasionally in the
past and will occasionally in the future ‘prepare or draw deeds,
notes, mortgages,
. releases and other instruments necessary in
Hon. J. P. Gibbs, page 5 (0-6064)
connection with perfecting titles upon which it is issuing or
plans to issue title policies relating to the property rights
of others. It further admitted that such Instruments have
been and thereafter will be prepared in connection with trans-
actions In the course of which the company issues or obligates
itself to issue policies of title insurance. It further ad-
mitted that it advises interested parties as to the purpose
and legal effects of the Instruments drawn by it.
The Supreme Court held under these facts, and we quote:
“It (defendant) therefore advise others as to
the secular law, and draws deeds and other papers
relating to secular rights within the inhibition
of the above statutes. These acts when performed
for a consideration, constitute the practice of
law, both within the terms of the statute above re-
ferred to and the deCiS%:ans of the courts on the
subject. (Citing authoritles)i’.
On the question of consideration, the defendant’s ad-
mission in the statement of facts was to the effect that “it
openly solicits verbally and: by advertisement the business of
issuance of title policies and represents that it will prepare
the instruments referred to in Paragraph 3 thereof, making no
separate charge for such service. Upon such facts, the court
held that there was within the provision of the statute, :‘a con-
sideration, reward or pecuniary benefit’ within the above refer-
red to provisions of Article 430a, Penal Code of Texas flowing
to the defendant for the legal services so rendered. (Citing
cases) II
As disclosed by the record in the Hexter case, said
defendant acted as agent for a title insurance company, and as
such agent makes contracts for its nrincinal to insure the titlg
to land and liens thereon.
Apparently following the decision in Peoples v. Law-
yers Title Corporation, 282 No. N.Y. 513, 27 N.E.2d 30, the
court held that the preparation of such title papers was not a
nece s s W-Y incident of the business of insurine titles.
It should further be noted as was pointed out in the
Hexter case, that the dealsion did not involve a mere isolated
transaction in which a legal document had been prepared as a
pure gratuity but the case involved a corporation as agent hold-
ing Itself out as being qualified to perform the legal services
and that it did so with continuity for the purpose of increasing
the legitimate business of Its principal.
Hon. J. P. Gibbs, page 6 .(o-6064)
It has been held that it Is not within the province
of the Board of Insurance Commissioners to regulate the prac-
tice of law and the schedule of fees tendered in connection
with this request cannot operate to legally empower a title
insurance company to perform acts which constitute the practice
of law. Stewart Abstract Company v. Judicial Commission of
Jefferson County et al., 131 S.W.2d 686.
Neither the language in Section 21 above quoted or
any rule promulgated by the Board can be interpreted, in the
light of the authorities cited in the Hexter case, as permit-
ting the owner or operator of an abstract plant to violate the
legal practice act. Any division of premiums therein permitted
and approved by the Board are not to be consldered as allowed
for Illegal services or services not necessarily a part of the
business of the principal. It is apparent that the Legislature
recognized that in insuring titles, the services generally per-
formed by an abstracter, such as search of the records and pre-
paration of an abstract for the title examination was au inci-
dent of the business of the title company engaged in insuring
titles.
In Words and Phrases, Volt 7, Permahent Edition, P.
817, It is stated that “commissions” Is a word without technical-
meaning, but, when used to express compensation for services ren-
dered, it usually denotes a percentage on the amount of moneys
paid out or received. Purifoy v. Godfrey, 16 So. 701.
Other than in the proviso clause of Section 21 the
entire act, Article 1302a, deals with the company entire 1y as
distinguished from its agents. The word lldevice’l as associated
with the words “rebate and discount” in this section of the stat-
ute is indicative of Its meaning and clearly has reference to
unlawful rebate and discount of the premiumor any portion there-
of promulgated by the Board. Section 3 of the Act provides that
under no circumstances shall any rate or premium be charged for
policies or underwriting contracts different fromthose fixed and
promulgated by the Board. There Is no penal provision, however,
directed to the agent in any of the provisions of this act.
We entertain some doubt that the Legislature intended
the language nrebate” etc. immediately following the word llcom-
missions”, to anywise relate to such lawful commissions as might
be paid to its appointed representatives or agents. Regardless
of a proper interpretation of Sect,ion 21 under a strict con-
struction applicable thereto and in light of the foregoing, we
deem it unnecessary to determine whether or not there is a Vio-
lation thereof in view of other statutes directly involved.
. . I.
Hon. J. P. Gibbs, page 7 (~-6064)
In the Hexter case, the defendant’s counsel recog-
nixed that if the transactions there involved no wise related
to defendant’s business, the defendant through its agent
would be practicing law. As heretofore pointed out, the court
plainly held that such service was not a necessary incident
of the business of Insuring titles. In referring to the busi-
ness of title insurance as well as similar service involved
herein on the part of such companies, the Chief Justice In his
opinion stated:
“The title company must accept the title and
insure it as it Is, or reject it. It may examine
the title, point out the defects and specify the
requirepts necessary to meet its demands, but it
b the usiness of the aaulicant for the insurancq
to cure the defects.” (Underscoring ours)
Agency is the relationship which results from the mani-
festations of consent by one person to another that the other
shall act on his behalf and subject to his control, and consent
by the other to so act. A generals agent is an agent authorized
to conduct a series of transactions involving a continuity of serv-
ice. Restatement of Law of Agency, Par. 1, 3. See Couch on In-
surance Law, par. 506.
We are mindful of the rule that the agent as such, Is
not in a fiduciary relationship with the principal as to matters
In whi;hm;;,;s not employed. Restatement of Law of Agency, Par.
390. the services referred to in your questions are ones
performable okLy by licensed attorneys, members of the State Bar.
Should such attorneys hold themselvea out as rendering this serv-
ice free, they are in one and the same transaction tending to the
business of an applicant for the Insurance, in no wise a neces-
sary Incident to the agency. It cannot be reasonably contended
that members of the legal profession In such business transac-
tions are serving their clients present or prospective. The fail-
ure to charge for such service would not relieve an attorney from
the duty owed in such transactions of special trust and confidence.
As to the applicant for insurance, such attorney agent is placed
in the position of a ballee in procuring Insurance upon the prop-
erty In his possession which act inures to the benefit of the
owner ; Polly v. Danieis 264 NoYe Sup. 194; Couch Ins. Law Vol.
2 Par. 451; Broussard et al. V. South Texas Rice CO., 131 kw.
4i2.
Section 16, Art. 5062b, V.A.C.S., provides for the sus-
pension or cancellation of the license of either class of agents,
local recording agents or solicitors guilty of rebating any insur-
ance premium. Rebating on the part of any agent of an insurer is
. . .,
.. .
Hon. J. P. Gibbs, page 8 (0-6064) ..:*
condemned by the laws of this State as being against public
policy. See Art. 5053, V.A.C.S., and Art. 578, Penal Code
of Texas.
Article 578 of the Penal Code in part provides:
Wo Insurance company doing business in this
state . . . nor shall any . . . officer, agent,
solicitor or representative thereof pay allow or
give, or offer to pay allow, or give, d rectly or
indirectly as an inducement to insurance, any re-
bate of premium payable on the policy, . . . or any
paid employment or contract for service of any kind,
or any valuable consideration or Inducement what-
ever, not specified in the policy contract of insur-
ance j . . . Any officer or agent of such company
violating any provision of this article shall be
fined not less than one hundred nor more than five
hundred dollars .‘I
Answering your questions under the a?uthorities here-
inabove discussed, it is the.opini.on of this department that
any agent for a title insurance company who receives a com-
mission or percentage of the premium, whether an individual,
firm or partnership.; licensed attorney and member of the State
Bar or otherwise, and who, as an inducement to secure the sale
of a title insurance policy makes It a practice of furnishing
free of charge the service of preparing deeds of conveyance,
quitc18lm~ deeds and other curative instruments for purchasers
of such title policies effected through such a ent or agency,
is engaged in rebati in violation of Art. 50%2b, Sec. 16,
V.A.C.S., and Art. 57 3 , Penal Code of Texas.
We are not to be understood as ruling on any sing16
transaction Involved in either of your questions under circum-
stances not disclosing a continuity oi’ or the agent holding
himself out as rendering such free services as an inducement
to effectuate the contract. Such a fact question would involve
all facts relating to the particular transaction and not before
this department.
Nothing herein Is to be construed as passing upon any
present or proposed rule or regulation of the Board of Insur-
ance Commissioners or the necessity therefor.
APPROVED APR’30, 1945 Yours very truly
/s/ Carlos C. Ashley ATTORNEY GENERAL OF TEXAS
FIRST ASSISTANTATTORNEY GENERAL By /s/ Wm. R. King
APPROVED:OPINIONCOMMITTEE Wm. R. King, Assistant
BY LPL, CHAIRMAN
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